82,996
edits
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
(One intermediate revision by the same user not shown) | |||
Line 1: | Line 1: | ||
{{a|security|}}A form of {{t|credit support}} where one chap agrees to make good the obligations of another chap to a third party, if the second chap can’t or won’t. | {{a|security|}}A form of {{t|credit support}} where one chap agrees to make good the obligations of another chap to a third party, if the second chap can’t or won’t. Rather similar — ''very'' similar — ''strikingly similar'' — to a [[surety]]. | ||
==Types of guarantee== | ==Types of guarantee== | ||
There’s a saying in legal circles: [[anus matronae parvae malas leges faciunt]]: ''little old ladies make bad law''. | There’s a saying in legal circles: [[anus matronae parvae malas leges faciunt]]: ''little old ladies make bad law''. | ||
In the history of the common law, more [[little old ladies]] than you’d expect seem to have given guarantees.The common law is therefore littered with well-meaning judgments applying (and, frankly, making up) idiosyncratic, counter-intuitive and at times plainly stupid rules just to let little old lady-guarantors off the hook. This means it is a minefield for lawyers. You know what you find in mines: GOLD. So a guarantee is a place, like no other, where you need {{tag|magic words}}. | In the history of the common law, more [[little old ladies]] than you’d expect seem to have given guarantees.The common law is therefore littered with well-meaning judgments applying (and, frankly, making up) idiosyncratic, counter-intuitive and at times plainly stupid rules just to let little old lady-guarantors off the hook. This means it is a minefield for lawyers. You know what you find in mines: GOLD. So a guarantee is a place, like no other, where you need {{tag|magic words}}. | ||
===[[Continuing guarantee]]=== | ====[[Continuing guarantee]]==== | ||
{{Continuing guarantee description}} <br /> | {{Continuing guarantee description}} <br /> | ||
====[[Demand guarantee]]=== | ====[[Demand guarantee]]==== | ||
{{Demand guarantee description}} <br /> | {{Demand guarantee description}} <br /> | ||
== | ==Guarantee vs [[Indemnity]]== | ||
Not, strictly speaking, a guarantee at all, but a contractual obligation having a similar economic effect is the [[indemnity]]. Note the [[statute of frauds]] doesn’t apply to an [[indemnity]] - which is why it’s traditionally seen as a useful thing to attach to a guarantee.<br /> | Not, strictly speaking, a guarantee at all, but a contractual obligation having a similar economic effect is the [[indemnity]]. Note the [[statute of frauds]] doesn’t apply to an [[indemnity]] - which is why it’s traditionally seen as a useful thing to attach to a guarantee.<br /> | ||
==Negotiation points== | ==Negotiation points== | ||
====[[Assignment]] of a [[Guarantor]]’s rights==== | |||
A Guarantor has certain rights it acquires at law, even where it executes as a deed (such as the right of subrogation), and there is a risk that a [[guarantor]] who assigns these rights might somehow mysteriously compromise a beneficiary’s rights under the guarantee. So, to be sure, limit that right of assignment. | A Guarantor has certain rights it acquires at law, even where it executes as a deed (such as the right of subrogation), and there is a risk that a [[guarantor]] who assigns these rights might somehow mysteriously compromise a beneficiary’s rights under the guarantee. So, to be sure, limit that right of assignment. | ||
{{isdaguaranteewarning|isdaprov}} | {{isdaguaranteewarning|isdaprov}} | ||
==The perils of unilateral termination rights== | ====The perils of unilateral termination rights==== | ||
A related point: be careful about allowing the [[guarantor]] a termination right, even if amounts owing before termination are meant to remain [[guarantee|guaranteed]]. For a [[mark-to-market]] exposure under a [[master agreement]], whither the guaranteed obligation? The [[mark-to-market]] exposure isn’t, of itself, an obligation, at least not until until the contract has been closed out. Until then it is an emergent property of all the live [[transaction|transactions]] under the [[master agreement]]. Nor are those transactions “existing obligations” in whole: each will comprise future obligations, which may be contingent, and in any case are not yet due. | A related point: be careful about allowing the [[guarantor]] a termination right, even if amounts owing before termination are meant to remain [[guarantee|guaranteed]]. For a [[mark-to-market]] exposure under a [[master agreement]], whither the guaranteed obligation? The [[mark-to-market]] exposure isn’t, of itself, an obligation, at least not until until the contract has been closed out. Until then it is an emergent property of all the live [[transaction|transactions]] under the [[master agreement]]. Nor are those transactions “existing obligations” in whole: each will comprise future obligations, which may be contingent, and in any case are not yet due. | ||
Line 59: | Line 58: | ||
{{sa}} | {{sa}} | ||
*[[Surety]] | |||
*The [[JC]]’s handy [[guarantee checklist]] | *The [[JC]]’s handy [[guarantee checklist]] | ||
*{{isdaprov|Credit Support Document}} | *{{isdaprov|Credit Support Document}} |